Man With Beer in Airport Is Economic Indicator

April 11 (Bloomberg) -- Ethiopia isn’t the first place you
would look for clues about Asia’s economies. Nor does Jose
Rabacal, a 29-year-old Filipino sipping beer at an Addis Ababa
airport cafe, think he’s a human economic indicator.

But he is, and so are his 10 compatriots as they bided
their time recently during a multihour layover. Each moved to
Africa from the Philippines for opportunities that leaders
failed to offer at home. Each left behind a family they see once
a year, if they are lucky.

“I haven’t seen my three kids in 14 months,” says
Rabacal, who works in mining in South Africa. “But the money I
make here is more than I could ever hope to make at home. It
would be nice if my government thought about the sacrifices we
Filipinos, we Asians, are forced to make.”

The good news is that the Philippines now has a president
who not only gets the problem, but is doing something about it
and offering an example to other developing nations that think
it’s just fine for ambitious people to seek opportunities
outside their homeland.

Since taking office in 2010, Benigno Aquino has homed in on
the reasons why the Philippines remains a junk credit. He
attacked corruption, got a handle on public expenditure,
improved infrastructure and worked to boost competitiveness.
These days, the Philippines can raise funds almost as cheaply as
investment-grade Italy.

Misunderstood Strengths

Yet the issue of remittances from expatriate earnings has
long been as ignored in Manila as it is misunderstood. It’s the
human equivalent of China’s vast currency reserves. The
conventional wisdom is that hoarding $3.2 trillion of cash is a
strength, the ultimate rainy-day fund. In reality, it’s a
weakness. The reserves are a trap; if China sells them, markets
crash.

Remittances are often called the Philippines’ secret
weapon. About 10 percent of the nation’s 102 million citizens
work overseas and the cash they send home supports domestic
consumption. That helped insulate the nation from the global
financial shocks after Lehman Brothers Holdings Inc. blew up in
2008.

But there is a growing realization that remittances are a
trap of a different kind. Sending so many young, hard-working
citizens abroad causes a brain drain that lowers the quality of
the labor force and, ultimately, growth. It leads to social
problems as entire generations of children grow up without one
or both parents present.

“The president wants to make being an overseas Filipino
worker a choice, not a necessity,” Finance Secretary Cesar
Purisima said recently.

Purisima is very matter-of-fact about the pros and cons of
remittances. “We play the hand we are dealt,” he says,
referring to a three-decades-old practice of exporting ever-growing numbers of workers. The government would be remiss in
not seeing the short-term benefits of all that cash pouring in.
“But in the meantime,” Purisima says, “we need to create
conditions for the workers to come back.”

The Aquino administration is overhauling the outmoded
education system. Increased funding is being met with efforts to
upgrade the national curriculum to improve competitiveness in
the Philippines. This coincides with rooting out the corruption
that stymies the construction of world-class roads, bridges,
ports, telecommunications systems and power grids.

Harnessing Beauty

It means doing two things previous administrations talked a
great deal about but took little action: attracting more foreign
direct investment and cultivating long-neglected sectors, such
as tourism. For the former, the focus includes expanding the
back-office outsourcing industry and bringing more manufacturing
jobs to the Philippines. For the latter, the goal is to harness
the natural beauty and vast biodiversity of the archipelago’s
7,000-plus tropical islands.

The government is working to see that money arriving from
abroad is used productively, including getting more of it
invested in financial assets.

“The thing about remittances is, used properly, they can
help strengthen countries in the long run, not just provide
instant gratification today,” says Eric-Vincent Guichard, the
chief executive officer of London-based Homestrings LLC, which
helps members of the Filipino diaspora with investment
opportunities.

Aquino’s team is taking on the issue of overpopulation by
offering family-planning services. That has been a third-rail
topic in a nation in which the Catholic Church wields great
power. Condoms, birth-control pills and other contraceptives are
becoming more widely available.

Finance ministers are one part economic manager, one part
cheerleader and one part shrink. Along with stabilizing finances
and waving the investment flag, it often falls to them to sell
the idea that change is afoot. That’s easier to do if your
policies are working, which seems to be the case in the
Philippines.

“I’m a big believer in the Pygmalion concept -- if people
believe things can change for the better, they will,” Purisima
says. “And Filipinos are beginning to believe again -- to hope
again.”

So at long last, the Philippines’ economic exiles might be
working in their home country and seeing their kids more than
once a year.

(William Pesek is a Bloomberg View columnist. The opinions
expressed are his own.)